Van Eyk Investments Pty Limited, in the matter of Van Eyk Investments Pty Limited
[2011] FCA 737
•3 June 2011
FEDERAL COURT OF AUSTRALIA
Van Eyk Investments Pty Limited, in the matter of Van Eyk Investments Pty Limited [2011] FCA 737
Citation: Van Eyk Investments Pty Limited, in the matter of Van Eyk Investments Pty Limited [2011] FCA 737 Parties: VAN EYK INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 078 974 197, BLAIR ALEXANDER PLEASH and RICHARD ALBARRAN File number(s): NSD 677 of 2011 Judge: EMMETT J Date of judgment: 3 June 2011 Legislation: Corporations Act 2001 (Cth) ss 439A, 439B, 445F, 447A Cases cited: Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612 Date of hearing: 3 June 2011 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 10 Counsel for the plaintiffs: D R Stack Solicitor for the plaintiffs: O’Neill Partners
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 677 of 2011
IN THE MATTER OF VAN EYK INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 078 974 197
VAN EYK INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 078 974 197
First PlaintiffBLAIR ALEXANDER PLEASH and RICHARD ALBARRAN
Second Plaintiffs
JUDGE:
EMMETT J
DATE OF ORDER:
3 JUNE 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Pursuant to section 447A of the Corporations Act 2001 (Cth) (the Corporations Act), Part 5.3A of the Corporations Act operate in respect of the affairs of Van Eyk Investments Pty Limited (the Company) as if:
1.1the meeting of creditors of the Company purportedly held on 29 July 2010 was invalid and the resolutions passed at that meeting were ineffective;
1.2the deed of company arrangement dated 26 May 2009, entered into by the Company was not terminated on 29 July 2010, but has since 26 May 2009 remained, and continues to remain, in full force and operation; and
1.3Blair Alexander Pleash and Richard Albarran (the Deed Administrators) are, and since 26 May 2009 have been, the Deed Administrators of the deed of company arrangement.
2.Forthwith upon the making of these orders, the Deed Administrators:
2.1lodge a copy of the orders with the Australian Securities and Investments Commission; and
2.2cause all persons set out in Annexure A to the originating process to be given written notice of the making of these orders.
3.The Deed Administrators, within 28 days of the making of these orders, convene a meeting of the creditors of the Company pursuant to s 445F of the Corporations Act by issuing written notice pursuant to s 445F(2) in the form of the Notice of Meeting annexed to the originating process.
4.The proceeding be otherwise dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 677 of 2011
IN THE MATTER OF VAN EYK INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 078 974 197
VAN EYK INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 078 974 197
First PlaintiffBLAIR ALEXANDER PLEASH and RICHARD ALBARRAN
Second Plaintiffs
JUDGE:
EMMETT J
DATE:
3 JUNE 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The first plaintiff, Van Eyk Investments Pty Ltd (the Company), was incorporated on 19 June 1997. Its directors and shareholders were and are Jan Van Eyk and his wife, Christine Van Eyk (the Directors). As at December 2008, the Company’s business involved the operation of four butcher shops in the Brisbane area. On 12 January 2009, the second plaintiffs, Blair Pleash and Richard Albarran (the Administrators), were appointed as administrators of the Company pursuant to a resolution of the Directors passed on that day. On 22 April 2009, at an adjourned meeting of the creditors of the Company, convened pursuant to s 439A of the Corporations Act 2001 (Cth) (the Corporations Act), the creditors resolved that the Company enter into a deed of company arrangement and that the Administrators be the administrators under the deed.
On 26 May 2009, the Company, the Directors and the Administrators entered into a deed of company arrangement (the Deed). The Deed provided that a sum of $500,000 would be paid to the Administrators by 36 monthly instalments of $13,888.88. Under the Deed, the Directors provided a guarantee and an indemnity in respect of the Company’s obligations pursuant to the Deed. In addition, Mr Van Eyk was to grant a mortgage over a property situated at Greenslopes, Queensland and another property situated at Surfers Paradise, Queensland to secure payment of the sum of $500,000. On 29 May 2009, a mortgage was executed by Mr Van Eyk in respect of those properties. The Deed provided that the day to day control of the business of the Company would be returned to the Directors.
From May 2009 to January 2010, payments were made in accordance with the Deed. However, the payment due on 15 February 2010 was not made in full, and there have been no payments since that time. On 18 May 2010, notice of default was given by the Administrators to the Company and the Directors. On 19 July 2010, the Administrators made a report to creditors confirming non-compliance with the terms of the Deed. They also gave notice of a meeting of creditors to be held on 29 July 2010, for the purpose of considering the termination of the Deed. The report did not include any information concerning the possible impact of the termination of the Deed or the enforcement of the mortgages and guarantees given by the Directors in respect of the obligation to pay the sum of $500,000.
A meeting of creditors was held on 29 July 2010. However, because of commitments in relation to unconnected matters, neither of the Administrators attended the meeting in person. Rather, Mr Pleash purported to preside over the meeting by telephone. At the meeting, a resolution was passed that the Deed be terminated and that the Company be placed into liquidation, with the Administrators as liquidators.
The Administrators are now concerned as to two difficulties potentially arising from the circumstances that I have briefly described. First, there is a question as to whether or not the meeting of 29 July 2010 had been validly held, and therefore as to whether or not the Deed had been terminated and the Company placed into liquidation. Secondly, and alternatively, if the resolution passed on 29 July 2010 was effective, the consequence may be that the Deed is no longer of any effect and that, therefore, the guarantee, indemnity and security given by the Directors pursuant to the Deed cannot be enforced.
Section 445F of the Corporations Act provides that administrators of a deed of company arrangement may convene a meeting of the company’s creditors to consider variation or termination of the deed. Section 445F(4) provides that at a meeting convened under s 445F, the deed’s administrator is to preside. The terms of s 445F are, in practical terms, identical to the terms of ss 439A and 439B of the Corporations Act, which provide that meetings of creditors convened by administrators are to be presided over by the administrators. There is therefore a concern as to whether a meeting purportedly convened under s 445F or ss 439A and 439B is validly held if one of the administrators does not preside in person. To construe the provisions as requiring the administrators’ physical presence at the meeting would conform to the use of language in the Corporations Regulations2001 and also with paragraphs of the Harmer Report, pursuant to which these provisions were introduced. (See Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612 at [246]-[247]). There is, therefore, a strong basis for concluding that s 445F was not complied with in relation to the meeting held on 29 July 2010. That may have the consequence that the resolutions purportedly passed at the meeting were ineffective.
In the circumstances that I have briefly narrated, the Administrators and the Company have now applied for orders under s 447A of the Corporations Act. Under s 447A, the Court may make such order as it thinks appropriate about how Part 5.3A of the Corporations Act is to operate in relation to a particular company. That provision is, in a sense, unusual. It is, however, a remedial provision, which is regularly used to deal with circumstances that arise from time to time in relation to the voluntary administration of companies under Part 5.3A.
The Administrators consider that the value of the remaining security held in relation to the Greenslopes property is sufficient to satisfy in full all claims associated with the guarantee and indemnity given by the Directors, notwithstanding that there is a prior ranking mortgage in respect of that property. However, the termination of the Deed may have the effect of limiting or otherwise diminishing the value of any claims that are available to the Administrators under the Deed against the Directors in respect of their guarantee and indemnity.
If the Deed has been terminated, and the benefit of the guarantee and the indemnity is lost, there would be substantial injustice to the creditors of the Company, in that the funds available for distribution to unsecured creditors in a liquidation would be very much less than would be expected if the Deed continues in operation. The Administrators propose that there will be a further meeting convened so that the creditors may be informed properly as to the consequences of termination of the Deed, and so that a decision can be made as to whether or not to maintain the Deed on foot, at least insofar as that may be desirable to enable enforcement of the guarantee and mortgage given pursuant to the Deed. The Administrators have indicated that they will not seek payment from the assets of the Company for their remuneration or expenses associated with the abortive meeting, or this application, or any subsequent meeting of the creditors that may be held in order to deal with the default under the Deed.
In the circumstances, it appears to me to be appropriate to make orders along the lines sought by the Company and the Administrators in their originating process filed on 18 May 2011. I therefore propose to make orders along those lines.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 28 June 2011
0
2
1